As discussed in the last two weeks and will continue in the next several weeks This Week in Real Estate is examining Limited Liability Partnerships (LLP) and Limited Liability Companies (LLC); their history, similarities, and differences. This week continue with discussing the traits of the LLP.
LLPs are independent, autonomous entities. This means, that LLPs are legal persons separate and distinct from their partners and that they may act and own property in their own names.
LLPs must have at least two partners but may have any greater number. Any type of person may be a partner of an LLP. Persons includes, individuals and entities such as corporations, partnerships, and LLCs, and in some jurisdictions, statutory trusts.
LLP statutes bestow limited liability on its partners. These statutes provide that just because a person is a partner in an LLP does not make the person liable for LLP obligations. However, there are many situations in which a person may have this liability despite their LLP liability shield. One primary example is situations in which the partner engages in personal misconduct on the LLP’s behalf.
LLPs may be formed for any purpose. Some jurisdictions, however, do limit the nature of the business that LLP’s are permitted to conduct. Check the local LLP statutes before the LLP is formed.
Under all LLP acts, LLPs may exercise any powers necessary or useful in pursuing their lawful purposes. Under most LLP acts, the LLP is managed by the partners, but in the partnership agreement, the partners may reserve management to one or more partners. The rights and duties of partners in an LLP will be governed by the agreement between partners and the partners have the flexibility to tailor the agreement to match their business goals. The statutory merger and conversion provisions of many LLP acts greatly facilitate the transformation of non-LLP entities to LLPs and vice versa.
Next week, This Week in Real Estate will discuss the characteristics of the limited liability company.
ABOUT JAMES LANDON
Jim Landon has practiced real estate law since 2002 and has been involved in real estate investment and construction for most of his life. Jim’s practice focuses on real estate transactions and land use.
Jim represents individuals and privately and publicly held companies in the purchase, sale, leasing, financing, and development of real property. He also represents title insurance companies on commercial purchases and refinancing transactions, as well as providing third-party legal opinions regarding Delaware law related to Delaware entities.
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